Czech Communication Profile 2012

Anticipated GDP increase expected to slow down decline in telecom revenue in 2012

The Czech economy has been affected by the world financial turmoil due to weakening request for its export products. The Czech National Bank (CNB) estimated that the economy will have stagnated for years before showing some recovery by the end of 2011: the economy is roughly at the level it was at the end of 2007. The recovery process is jeopardised by inflationary pressures caused by a increase in costs for oil, food and raw materials, counteracted by the strengthening Czech currency. The CNB predicted that the Czech GDP would grow 1.6% year-on-year in 2011, though the Finance Ministry has suggested a 2.2% increase. Nevertheless, telecom sector revenue fell by nearly 5% in 2010, year-on-year, and though a brighter economic estimate promises higher consumer spend, regulatory measures will continue to dampen revenue for operators.

The Czech Republic joined the European Union (EU) in 2004, and thereafter the country’s telecoms market was reformed in common with EU Directives. This included full market liberalisation, which resulted in alternative operators being able to launch services competing with the incumbent, then known as Cesky Telecom and since branded as Telefónica O2 CR.

The fixed broadband market continues to show significant increase in the wake of falling prices. Fixed wireless broadband remains popular, having shown initial increase while nascent DSL and cable networks were being built: wireless broadband usage is part the highest in the EU. The fibre-to-the-home (FttH) sector is as well experiencing rapid increase, while broadband access has laid the foundation for a developing internet Society, with a range of online services and activities taking place.

The Czech Republic’s media market is evolving under the weight of digital TV and convergence trends, with over half the people receiving TV services digitally. The uptake of IPTV services is growing on the back of additional affordable broadband access while the cable TV market has undergone consolidation to create a major player with sufficient size to compete entirely against Telefónica O2 CR. Analogue switch-off is continuing on a regional basis before the process is completed at the end of 2012. Digital satellite TV services are widely available from a number of competing platforms.

The well developed mobile market has part the highest SIM card penetration levels in Eastern Europe, far above the EU average. With mobile voice markets saturated and opportunities for new mobile subscriber additions minimal, the three established mobile network operators have focused on developing ARPU, which have fallen as a result of market competition and regulatory measures: strategies include migrating prepaid users to contract plans and encouraging take up of mobile broadband services. To this end considerable investment has been made in upgrading HSPA networks across the country. MNOs have as well expanded into offering fixed line voice and data services.

Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Market highlights:

• T-Mobile has expanded its HSPA+ coverage, reaching 43% of the people (97 cities and larger municipalities, inclunding some 230 smaller towns) by mid-2011. National coverage is expected by 2013, delivering capable mobile broadband to rural areas.
• The regulator’s decision to switch off analogue mobile services based on the NMT system will allow the spectrum to be reassigned. Telefónica stopped using NMT for voice services in 2006, instead using the band to support for CMDA data transfer for mobile broadband.
• Despite difficulties in other European markets, Telefónica, T-Mobile and Vodafone are developing a DVB-H mobile TV network in the Czech Republic based on trials undergone since 2008.
• The alliance part MNOs to promote m-payment services, using a joint ‘Plat mobilem’ (Pay by Mobile) logo, should rapidly expedite market developments in coming years given the propensity for Czechs to use cash rather than credit cards for most purchases.
• Vodafone CR launched VDSL2 services in mid-2011, delivering up to 25Mb/s to a third of the people.
• In 2010, total revenues from electronic communications fell 4.8% year-on-year to CZK126.5 billion. The major fall was in the mobile sector, which fell 7.9% to CSK74.4 billion. Nevertheless, in general investment in networks and telecoms services increased 4.1% in 2010 to CZK 15.02 billion. Respectable increase in GDP expected for 2011 and 2012 promises some recovery in consumer spend and telecom sector revenue.
• With the switch to DTTV progressing, the first multiplex now reaches nearly 100% of the people, the second multiplex covers over 89%, the third over 85% and the fourth 25% (concentrated on Prague, Plzen, Brno and Ostrava).

Broadband Market Insights

The Czech fixed broadband market continues to experience significant increase on the back of continued DSL uptake in the wake of falling prices. Fixed wireless broadband is the second most popular form of fixed broadband access, with usage part the highest in the EU. The nascent FttH sector is as well experiencing rapid increase. Widespread broadband access has laid the foundation for a developing internet society, with a range of online services and activities taking place.

This statement provides an overview of the country’s fixed broadband market in 2011, profiling the significant players, assessing access platforms and market trends and delivering a variety of insightful statistics inclunding a estimate for broadband take-up to 2020.

Key developments: Wireless broadband remaining popular; Vodafone launches VDSL2 services; RIO Media building of the major FttH networks; BPL in Prague a success through SmartCity Platform; total broadband subscriber base increases 16.7% in 2010 to 2.78 million; regulator’s September 2011 market data update; operator data to September 2011.

Digital Media Market Insights

The Czech Republic’s media market is evolving under the weight of digital TV and convergence trends, with over half the people now receiving TV services digitally. The uptake of IPTV services is growing on the back of additional affordable broadband access while the cable TV market has undergone consolidation to create a major player sizeable enough to compete entirely against the telecoms incumbent.

Analogue switch-off is continuing on a regional basis in the free-to-air broadcasting market as the uptake of digital terrestrial TV improves. Digital satellite TV services are widely available from a number of competing platforms. This statement profiles the digital media market in the Czech Republic in 2011, offering an overview of key players and a variety of statistics related to IPTV, VoD and DTTV developments.

Key developments: ASO on CT1 and CT2 completed; Ceske Radiokomunikace buys CDG to control three muxes; SkyLink bought by M7 Group; DVB-T2 trials underway; CRa merges with majority shareholder MCCH; regulator’s 2010 annual statement and market data update to September 2011; operator data to September 2011.

Convergence - Triple Play & Digital TV

The Czech Republic's media market is evolving under the weight of digital TV and convergence trends, with over half the people now receiving TV services digitally. Take up of IPTV services is growing on the back of additional affordable broadband access while the cable TV market has undergone consolidation to create a major player sizeable enough to compete entirely against the telecoms incumbent.

Analogue switch off is continuing on a regional basis in the Free-to-Air broadcasting market as take up of digital terrestrial TV improves. Digital satellite TV services are widely available from a number of competing platforms.

Telecom Market and Regulatory

The Czech Republic has a small but relatively sophisticated telecom market, with a number of alternative operators offering fixed-line services. Competition is growing in amount sectors, with alternative operators gaining size and strength through organic increase, and merger and acquisition activity.

The fixed-line incumbent, now privatised, is facing the increasingly challenging task of stabilising revenue as fixed-line traffic continues to migrate to mobile operators and competing fixed-line operators. Covering developments in the market and regulatory environment, this statement gives an insight into the evolving Czech fixed-line telecoms and IT markets in 2011, offering precious statistics, profiles of the major operators and infrastructure deployed.

Key developments: VOLNY transfers DSL subscribers to O2 and sues for CZK4 billion; stagnant economy since 2008 affecting consumer spend on telecom services, recovery expected in 2011 with GDP to grow 1.6-2.2%; telecom revenue falls 4.8% in 2010; regulator’s 2010 annual statement and market update to September 2011; operator data to September 2011.

Mobile Market Insights

Mobile penetration in the Czech Republic is part the highest in Central European nations and is high even by western European levels. With mobile voice markets saturated, the established operators, amount owned by major Western European players, have focused on growing revenue by marketing mobile broadband and other price-added services such as mobile content and applications.

Mobile advertising has been identified as a next increase market opportunity for mobile operators due to changing media usage patterns, with Vodafone the majority active in this area. This statement covers the mobile market of the Czech Republic in 2011, providing an overview of the network operators Vodafone, T-Mobile, Telefónica and MobilKom, inclunding technological, market and regulatory developments. A range of market and company statistics provide an insight into the national of both the mobile voice and data markets, inclunding the network players that operate in these markets.

Key developments: T-Mobile, O2 and Vodafone alliance to promote m-payment services; T-Mobile extends HSPA+ coverage to most of the people; Telefónica and T-Mobile sign-year 3G network sharing agreement; mobile market revenue grew 1.9% in 2010 to CZK45.2 billion; Telefonica approaches 66% 3G people coverage through network sharing transaction with T-Mobile; Vodafone looks to upgrade half of its 3G network with 21.6Mb/s HSPA+ by March 2012; regulator decides to close analogue NMT network; mobile ARPU continues to fall; Telefónica launches joint network monitoring centres for operation in Germany and Slovakia; Telefónica trials m-payments platform; regulator’s September 2011 market data update; operator data to September 2011.